INEOS Enterprises Holdings Limited Unaudited Interim Trading Statement Q1-2020
INEOS Enterprises Holdings Limited (“INEOS Enterprises”) reports its trading performance for the second quarter 2020.
Based on unaudited management information, INEOS Enterprises’ EBITDA before Special Items (“EBITDA”) for the second quarter 2020 was €117M. The second quarter result includes all segments on an as reported basis and does not include any proforma adjustments for acquisitions in the period. This compares to a pro-forma EBITDA of €89M for the second quarter 2019. Last Twelve Months pro-forma Q2 2020 EBITDA was €359M, compared to €332M for Full Year pro-forma 2019 and Q1 2020 LTM of €332M.
The second quarter saw a strong performance, despite previously reported conservatism driven by the COVID-19 pandemic. Governments around the world have continued to recognise the chemical industry as an essential key industry. As such, all of INEOS Enterprises’ sites have remained fully operational throughout the crisis.
INEOS Enterprises’ diverse portfolio, has resulted in a quarter where upside in products with medical and personal hygiene applications and end markets, has more than offset enforced reductions in certain sectors such construction and automotive.
In line with wider INEOS policy and across all businesses within the group, management have prioritised the safety of our employees by implementing COVID-19 compliant working conditions, consistent with our commitment to safety. As part of wider business prudence, we have continued to implement measures to conserve cash through this uncertain period by controlling all discretionary fixed costs and limiting capital expenditure to essential items only.
In Q2 the Solvents business EBITDA was €65M, compared to €13M in Q2 2019 and €14M in Q1 2020. The result builds on the positive momentum seen in Q1. The Solvents business has benefited from increased demand and prices for IPA, particularly on the back of a surge in demand for medical and sanitisation products. Ethanol demand has also remained robust during the quarter, which together with IPA has resulted in a significant increase in EBITDA over Q1 and versus the same period last year. We now see the market moving towards a more stable condition with some destocking following increased volumes through Q2, with price remaining high, but not at the levels seen in April and May.
In Q2 the Pigments business EBITDA was €28M, compared to €47M in Q2 2019 and €35M in Q1 2020. The results have been moderately impacted by reduced volumes in construction customers, as operations have been closed due to COVID-19 restrictions. Demand into household improvement coatings helped to offset some of this decline seen in more industrial end markets, but Q2 saw reduced volumes overall compared to the same period last year.
In Q2 the Composites business EBITDA was €19M compared to €25M in Q2 2019 and €31M in Q1 2020. Composites experienced lower volumes in the EMEA and Americas market due to continued customer lock-downs that began at the end of Q1. During the early part of the quarter, volumes and sale mix particularly impacted North America versus the same period last year, with demand slowly returning throughout Q2. Asian markets recovered to perform in line with expectations. Margins have remained stable across all regions, albeit slightly impacted by sales mix effects in North America.
In Q2 Chemical Intermediates EBITDA was €5M, compared to €4M in Q2 2019 and €7M in Q1 2020. Performance was supported by strong demand in water treatment and progressive improvements in composites demand, offset by some temporary customer lock-downs, notably Canadian gold mines.
We are also proud to announce that we have donated in excess of 4M bottles of hand sanitiser to the national and local health establishments across the United States and Europe. Our sites are now transitioning into commercial production for sale directly into retail and other sectors as we look to develop the INEOS Hygienics brand. During the quarter, we have invested around €5M in this new business, mainly comprising the cost of donations and investment in plant and machinery to support bottling operations.
During Q2 INEOS Enterprises delivered further cost savings of c.€8M bringing cumulative cost savings to date of c.€60M. The Business remains committed to delivering current projects and targeted delivery continues to outperform initial expectations. Significant identification projects within Composites and Pigments are ongoing and are expected to deliver opportunities above those in the initial plans.
Net debt was €1,005Bn at the end of June with cash balances of €369M. Our liquidity position remains exceptionally strong, with the €300M Securitisation facility undrawn at the end of June. Proforma adjusted leverage is c. 2.8x. at the quarter end.